Shareholder Disputes

Business Litigation Attorneys Assisting New York City Clients

Shareholder disputes in New York can be sensitive and complex. They may involve an alleged breach of a fiduciary duty, a dispute over how much executives should be compensated, shareholder appraisal rights, minority shareholder rights, or a conflict over who should control the direction in which the business will go in the future. Disputes over these important matters have the potential to undermine a corporation if there is no mechanism in place for an efficient resolution. Sometimes a shareholder agreement is in place so that everyone who holds stocks understands their rights or obligations. In other cases, New York law governs the issue. At The Linden Law Group, P.C., our New York City shareholder litigation lawyers can provide knowledgeable legal representation in case of a dispute.

Common Circumstances Surrounding Shareholder Disputes

Often, shareholder disputes can be resolved by turning to a well-drafted shareholder agreement. When appropriately drafted, the agreement should address the rights and obligations of shareholders, both majority and minority. The majority shareholders will look at the issue of whether the right to transfer shares in a closely held corporation should be restricted. In closely held corporations, the people who founded the company may want to work only with each other, and they may not be interested in working with a spouse or another founder's children.

The shareholder agreement should spell out restrictions in case of death, disabling illness, divorce, retirement, termination for cause, and other contingencies. One way in which a written shareholder agreement might address those contingencies is by including a right of first refusal. This would expressly state that a particular shareholder is entitled to buy shares when someone proposes an unwelcome transfer.

In some cases, however, there is no shareholder agreement. Alternatively, the agreement may not provide a method by which a dispute should be resolved. The New York Business Corporation Law, as well as common law, will govern the dispute in that case. A shareholder litigation attorney in New York City can advise you on how the law may apply to your situation.

For example, shareholder lawsuits are often based on the right of shareholders to inspect the corporate books. Since shareholders are the owners of the corporation, they have an interest in looking at the state of their financial information. However, the law balances this interest with the need to separate ownership and management control. Inspection rights may be limited so that the corporation's board of directors can manage the corporation's affairs properly. In New York, shareholders have inspection rights under common law and under the Business Corporation Law.

In order to exercise a right of inspection, a demand must be made on the board of directors, asking for specific corporate books and records. The board is supposed to respond in a reasonable time frame. If the board denies the demand, the shareholder can ask for judicial relief with the assistance of a New York City shareholder litigation attorney.

To enforce the right of inspection in court, the shareholder seeking to enforce it will need to be a shareholder at the time of the request and will also need to have a good-faith and proper reason for making the request. Corporations are allowed to ask for proof of shareholder status before giving access. Common law in New York only permits the exercise of inspection rights when the requestor acts in good faith and with a proper purpose. In contrast, if the lawsuit is based on the assertion that the shareholder has a statutory right to inspect, the corporation has the burden of showing bad faith or an improper purpose.

Shareholder purposes that are considered proper include calculating the value of stock, investigating management's actions, obtaining information to assist with litigation, and determining the financial condition of the corporation. Improper purposes would include trying to discover business secrets to help a competitor, to get prospects for a personal reason, or to locate information that furthers the shareholder's social or political goals.

Another reason for a shareholder dispute might be a breach of fiduciary duty. In a closely held corporation, similar to a partnership, shareholders owe fiduciary duties to each other. This means that they are not supposed to steal corporate opportunities or engage in self-dealing, among other things. Majority shareholders owe a fiduciary duty to minority shareholders not to engage in oppressive actions. Under case law, oppressive actions are actions that, when viewed objectively, substantially defeat reasonable shareholder expectations that were central to a shareholder's decision to join a venture.

Consult a Skillful Shareholder Litigation Lawyer in New York City

If you are concerned about a shareholder dispute, you should retain an experienced attorney to represent you. The Linden Law Group, P.C. represents businesses and their owners in Manhattan, Queens, the Bronx, Brooklyn, and Staten Island, as well as in Nassau and Suffolk Counties. Contact us at (212) 537-6612 or via our online form. Sue to get your money and damages back. We are also available to help you appeal an unfavorable judgment affecting your business or your rights as a shareholder if needed.

Client Reviews
I highly recommend this law firm. Attorneys Unger and Benjamin battled a real estate scammer who defrauded me out of substantial money. They were able to get a good result for me after the defendants put up numerous obstacles and delays over 18 months. And they were honest with me regarding their upfront and contingency fees. Definitely hire this firm if you are a victim of fraud or breach of contract. Rebekah W.
Over the years I have had dealings with many of attorneys and I can honestly say that Mr. Benjamin is the best lawyer I have ever worked with. He's conscientious, and takes care of your case as if his own interests were at stake. He's professional, always answered my calls and takes the time to discuss the best course to take. Everything was done timely and efficiently. I couldn't be happier with the result. I wish they were all like him. The best decision I made was to use him for all my legal needs. Nancy O.
Attorney Benjamin is an excellent attorney. He battled a finance company for me for nine years, defeating multiple motions that were thrown at him over the years. He is an honest, compassionate and trustworthy attorney, and was an aggressive advocate for me for a long time. After so many years, he finally got a great result in August, 2015 after defeating still another motion by the lender. I highly recommend Attorney Benjamin. Daniel O.
We hired this Firm on July 20, 2018 to sue a company for fraud. While the case took longer than we wanted, the lawyers battled for 1 year with this nationwide real estate company to expose the scam they inflicted on us. In order to get to settlement, our lawyer Jeffrey Benjamin cut the Firm's fee in order that we could put more money in our pocket and settle. The lawyers here are honest and bent over backwards to make us happy and settle, and not drag out the case for years. We are so happy we went with this Firm. Thank you. K.J.